The board of the Central Reserve Bank (BCR) raised the reference interest rate by 50 bps. to 3.50%, maintaining that, in this way, the normalization of the monetary policy position continues.
The BCR has had this trend since August of last year, when it began the upward rally, going from 0.25% to 0.5% at that time, and so on each month, facing the rise in prices.
For this decision he took into account the twelve-month inflation rate stood at 5.68% in January, above the target range.
The BCR maintains that, due to factors such as the increase in international prices of food supplies and fuels, as well as in the exchange rate.
The twelve-month inflation rate excluding food and energy stood at 3.08% in January, above the upper limit of the inflation target range.
“Inflation is projected to return to the target range in the fourth quarter of this year, due to the reversal of the effect of transitory factors on the inflation rate (exchange rate, international prices of fuels and grains) and that economic activity is will still be below its potential level”, he details.
However, it considers that It has been observing a greater persistence in the rise of international energy and food prices.
Another factor is thatTwelve-month inflation expectations rose from 3.68% to 3.73%, above the upper limit of the inflation target range.
What’s more, Most indicators of expectations about the economy continue in January in the pessimistic section.
In the international environment, the BCR observes that it is coming recovering, although at a slower rate due to the impact of COVID-19, due to the persistence of bottlenecks in the global supply of goods and services and relative uncertainty associated with the rate of reversal of monetary stimuli in advanced economies.
BCR in anticipation
The BCR indicates that it is especially attentive to new information regarding inflation and its expectations and the evolution of economic activity to consider, if necessary, modifications in the monetary policy position that guarantee the return of inflation to the target range on the projection horizon.
“The financial markets have continued to show volatility in a context of uncertainty and the BCR’s actions were aimed at mitigating said volatility,” they indicate.
Other settings
In the same session, the Board of Directors agreed on the following interest rates for operations in national currency of the BCR with the financial system under the window modality.
- Overnight deposits: 2.25% per annum.
- Direct report operations of securities and currency, and Monetary regulation credits: 4% per annum.
The next session of the Board in which the Monetary Program will be evaluated is scheduled for March 10, 2022.